Risk Taking Begets Risk Taking: Evidence from Casino Openings and Investor Portfolios
42 Pages Posted: 5 Aug 2015 Last revised: 15 Oct 2021
Date Written: October 14, 2021
We provide evidence that casino openings can have spillover effects on an individual's portfolio risk-taking. Using investor-level brokerage data and the initial legalization and opening of commercial casinos in the United States as a quasi-natural experiment, we find that after a casino opens in close geographical proximity to investors, those with a propensity to gamble increase their idiosyncratic portfolio risk by 12.86% relative to those who are unlikely to gamble. This effect lasts for approximately three months and does not affect systematic portfolio risk or portfolio returns. These results suggest that increased access to gambling can temporarily increase portfolio risk-taking for those with a propensity to gamble.
Keywords: investor behavior, portfolio risk taking, gambling
JEL Classification: D10, G10
Suggested Citation: Suggested Citation